There are five ways to manage risk:
a) Avoidance
b) Loss control
c) Retention
d) Non-insurance transfer
e) Insurance
Insurance is just one method of risk management. It is appropriate only for the low frequency and high severity risks, such as premature death or serious disability. We only need to insure against the "premature" occurrence of these events, as everyone will have to die eventually and it cannot be prevented.
Most people use a combination of avoidance, loss control and retention to handle most risks of high frequency or low severity. There is no point in insuring against these risks as the cost of insurance is rather high and it is quite a hassle to make a claim.
Retention means that you set aside savings to pay for the losses that are likely to occur. It is better to have savings to pay for medical expenses and retirement income when one gets old, rather than depend on insurance to pay these benefits. Sometime, when you need insurance to pay your expenses, you may find that your claim is rejected due to some technical reason.
An example of "non-insurance transfer" is when your medical expenses are transferred to your employer through the contract of employment.
To summarize, having adequate savings is as important as having insurance. It is better to pay a small premium to cover the risk of premature death, accident or disability and to save the money separately for future needs.
However, if the insurance policy provides a good return on your savings, compared to other types of investments, it is all right to save through an insurance policy. For this to happen, the expense and other charges for the insurance policy must be much lower than it is now. The "effect of deduction" should not exceed 15% of the accumulated regular premiums (compared to 40% that is taken away now by most insurance policies).
Insurance agents only advise partial transfer, partial self insurance, partial uninsured.This is typical. The reason is becuase insurance agents only want to sell wholelife and many consumers cannot afford fully insured with wholelife.
ReplyDeleteIn the company I work in (a major local insurer), many of the management staff cover themselves using term insurance. If they have wholelife or endowments, it is only a small part of their overall coverage.
ReplyDeleteThese guys tend to be university educated and did not come from or rise up through the sales route. Their backgrounds are typically in underwriting, claims, accounting, fund mgmt et al. Even VP of Sales force only had first 2 or 3 years as agent, the next 20 yrs or so were in corporate route. These are the people who have the clearest picture of what is going on and whether if par products are good deals or not.
So we have strange situation where mgmt who are mostly covered using term insurance, but then kicking, cursing and firing those agents who don't sell enough wholelife or endowments to meet the stipulated API targets.
Between their own jobs and clients' wellbeing, who do you think agents will work for? People you have been warned.
Ex-Con
The management and the ceo are the hypocrates .To be #1 they use the greedy agents who willingly carry out the dirty work to con their friends , their relatives and their policyholders. They closed their eyes to churning and replacement of products. Many agents even resorted to buy one get one free ruse and which the customers are made a sucker.. Anything money can do even to betray their relatives these agents are willing. What to do ? Commission is behind all this. Remove the commission and let's see whether these agents talk through their ass about the nobility of this job.
ReplyDeleteMAS must remove the commission to follow other countries. They too have a fair share of unscrupulous and unethical salesmen scam.
Ex-Con, how do you qualify "many" and of those you spoke to, what are their roles in the local insurer? Why would they reveal how much they are covered to you and how do you know they all telling you everything about their coverage? Just curious about your story...
ReplyDeleteMr Tan ntuc members get 30k upon death. Is there any catch? Or should i buy the card with wife before 60 and give 60k upon death of me and wife to children? Is it 60k or will it be less?
ReplyDelete